Question

Some recent financial statements for Smolira Golf Corp. follow.

SMOLIRA GOLF CORP. 2017 and 2018 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2017				2018					2017				2018
Current assets									Current liabilities
Cash	$	35,285			$	38,664			Accounts payable	$	38,232			$	43,032
Accounts receivable		18,251				28,576			Notes payable		19,908				16,875
Inventory		3,880				42,992			Other		20,674				25,354
Total	$	57,416			$	110,232			Total	$	78,814			$	85,261
									Long-term debt	$	119,500			$	183,060
									Owners’ equity
									Common stock and paid-in surplus	$	55,900			$	55,900
									Accumulated retained earnings		268,442				306,994
Fixed assets
Net plant and equipment	$	465,240			$	520,983			Total	$	324,342			$	362,894
Total assets	$	522,656			$	631,215			Total liabilities and owners’ equity	$	522,656			$	631,215

SMOLIRA GOLF CORP. 2018 Income Statement
Sales					$	510,954
Cost of goods sold						362,478
Depreciation						45,588
Earnings before interest and taxes					$	102,888
Interest paid						20,583
Taxable income					$	82,305
Taxes (24%)						19,753
Net income					$	62,552
Dividends	$	24,000
Retained earnings		38,552

Smolira Golf Corp. has 49,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $30.

  

a.	What is the price-earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	What are the dividends per share? (Round your answer to 2 decimal places, e.g., 32.16.)
c.	What is the market-to-book ratio at the end of 2018? (Round your answer to 2 decimal places, e.g., 32.16.)
d.	If the company’s growth rate is 6 percent, what is the PEG ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

(a)-Price earnings ratio

EPS = Net Income / Number of common shares

= $62,552 / 49,000 Shares

= $1.27657 per share

Price earnings ratio = Market price per share / EPS

= $30.00 / $1.27657 per share

= 23.50 Times

(b)-Dividends per share

Dividends per share = Dividends paid / Number of shares

= $24,000 / 49,000 Shares

= $0.49

(c)-Market-to-book ratio

Market-to-book ratio = Total Market value of equity / Book Value of Equity

= [49,000 Shares x $30.00] / $362,894

= $1,470,000 / $362,894

= 4.05 Times

(d)-PEG ratio

PEG ratio = Price earnings ratio / Growth ratio

= 23.50 / 6.00

= 3.92